What is the Pound to USD forecast?
The Pound to USD forecast is an estimate or educated guess as to where the value of sterling, versus the US dollar, will be, at a given point in the future.
FX price forecasts are made by teams of analysts and strategists at banks and brokers and also by experienced and active FX traders.
These estimates are collected, aggregated and averaged to form a consensus forecast for the value of a currency pair or cross at a future point. For example, 1 week ahead, one month ahead, one quarter ahead.
Forecasters use a mix of fundamental and technical data when making their assessments. They look at current and historical price action, and the relationships between currencies and cross rates to make their forecasts.
Changes in FX rates are driven by a combination of macroeconomic differentials, international capital flows and trading sentiment.
Analysts, strategists and traders try to assess the impact of all three factors on an FX rate to determine which way they think the price will move.
Given that some $6.0 trillion changes hands every day in the FX market, which trades 24 hours a day, five days a week, there can often be a lot at stake.
So the ability to correctly predict FX price movements is a skill that’s highly sought after.
FX forecasts can be used by retail traders to support their own trading.
For example, you could follow the forecasts of analysts who have a high degree of accuracy in particular currency pairs, and use the forecast of those who have low accuracy rates as reverse indicators.
They can also be used as a guide for timing large FX conversions to try and ensure the best rates if for example you are buying or selling property abroad.
Will the pound get stronger against the USD in 2021?
Until the Bank of England’s monetary policy committee met in early November the expectation was that the pound would appreciate versus the US currency in the closing stages of 2021
The Bank of England was thought likely to be the first major central bank to raise interest rates.
However, the MPC voted to keep UK interest rates on hold and the pound has lost -1.43% versus the US dollar in the two weeks since that decision and moved back to levels not seen since late December 2020.
Bank of England Governor Andrew Bailey has tried to talk the pound up, highlighting rising inflation and the need to raise interest rates, to curb that threat. However, he made similar comments ahead of November’s meeting and they may now fall on deaf ears.
The consensus forecast for GBP USD in one months time is for a cable rate of $1.3569.
Higher than current spot rates around $1.3429 but well down from a forecast of $1.3769, which was in play at the end of October. The MPC will meet once more before the year-end, on December 16th.
The USD has been strengthening in recent weeks. In fact, if we look at the Dollar Index, which measures the performance of the US dollar against a basket of currencies from its largest trading partners, we find that the greenback has gained +1.91% over the last month.
With US inflation riding high, markets are starting to think that it will be the Federal Reserve that blinks first, by either raising interest rates or reducing monetary stimulus at a faster pace.
Pound to USD weekly forecast
The current forecast for GBPUSD for the next week is that the pound will weaken slightly and trade back to $1.3414 from the spot rate of around $1.3500.
However, there isn’t a great deal of conviction in that view with analysts equally split between bullish, bearish and neutral outlooks. This suggests that short term moves in GBP USD will be driven by sentiment rather than fundamentals.
A weekly FX forecast will often be calculated by looking at the existing trends in the price of an FX pair or cross and extrapolating that trend a week forward, by, for example, drawing a trendline onto the chart of GBP USD.
Danish Bank Danske believes that the US dollar will continue to strengthen, however, its analysts take the view that this isn’t bad news for the pound, which they think will benefit from factors that are similar to those driving the dollar highly. In other words, they think that Sterling will fare better against the US currency than other European names.
Pound to USD monthly forecast
The forecast for GBP USD over the next month is for sterling to appreciate to $1.3569 and analysts have a far higher degree of conviction about this estimate.
With 81% of those polled being bullish of the pound over that time frame. Factors such as December’s MPC meeting, higher UK inflation and falling unemployment are all supportive of a stronger pound.
That said, analysts at Dutch Bank ING are backing the dollar to hang on to its recent gains, though they also highlight resistance in the dollar index at 96.00, and I note that the dollar hasn’t been above there, since July 2020.
Pound to USD yearly forecasts
Looking a year down the track is notoriously difficult for FX analysts, particularly in the current climate which still has limited long term visibility thanks to Covid and the legacy of economic issues it has left us with.
The team at ING has been one of the first to put their head on the block and forecast what will happen to sterling over the next 12 months saying that:
“GBP probably falls between the three stools of the: i) stronger dollar, ii) weaker low yielders and iii) steady commodity currencies. We think GBP can hold onto its 2021 gains unlike a market generally more pessimistic on the pound”
They believe the pound will rally to $1.36 by the summer of 2022. but will fall back to trade at $1.34 by the end of next year.
FX forecast online resources
You can find FX forecasts and other in formation by using the following links: